Knowledge of property values can mean potential savings

October 14, 2006|ELLEN JAMES MARTIN

Are you a wannabe homebuyer eyeing a particular property that's captured your fancy? Yet are you petrified that you'll pay too much? Even perfunctory research on local property values could help put your mind at ease. Smart buyers narrow their search to the precise area where they're looking, says Leo Berard, charter president of the National Association of Exclusive Buyer Agents (www.naeba.org). If you like a house on Pine Street, you should focus there solely. Data gathered on state or national real estate trends will have little bearing on your situation. Indeed, houses could be worth a good bit more in one pocket of a neighborhood than another, due simply to differences in, say, housing styles. "People might eagerly pay more for the Tudors on one side of the community than the split-levels of the same size just a couple of streets away," Berard says. "An on-the-ball purchaser operating in a strong buyers' market should be able to negotiate a healthy discount on the overall price or gain valuable concessions from the sellers," says Sid Davis, author of "A Survival Guide for Buying a Home." Here are several pointers for homebuyers determined to get a fair deal:

Look to the Internet for preliminary data on local valuations. A profusion of Web sites now provides free information on property values and can prove a valuable resource, Berard says. One example he cites is www.zillow.com, which allows you to search data at either the property or neighborhood level.

"These sites are a great starting point. At the minimum, they'll get you into the right ballpark on values," he says. Web sites are no substitute for guidance from an astute real estate agent with an in-depth knowledge of the local turf.

Tap into your agent's database. The classic method used by real estate professionals to reach an estimation of value for a property is known as a "Comparative Market Analysis." This technique is grounded in data on recent sales of homes similar to the one being judged.

Your real estate agent should find at least three transactions that are roughly comparable. Then the agent should add and subtract value based on differences between the home you like and the others. Real estate agents are the first to admit that their judgments on the value of any given property are based on more than data. "Determining value is never a perfect science. A lot of it is gut feel," Berard says.

Factor in neighborhood economic trends before you bid. When real estate markets are relatively volatile, as they are now, you need to look beyond closed deals to see where values are heading, Berard says.

In a town that's heavily reliant on a single employer, for instance, a wave of layoffs at a local plant could cripple values in surrounding areas. Conversely, values could ascend in a community that's benefited from a school boundary change.

Check inventory levels before crafting any offer. At present, many neighborhoods have a surplus of homes for sale. That means the supply of housing has outstripped demand and sellers must cater more to buyers.

The supply-demand ratio has everything to do with the bargaining power of purchasers, Davis says. Therefore, he says you should be kept abreast of inventory levels throughout your search period.

Consider asking for "concessions" in lieu of a lower price. Davis, a real estate broker as well as an author, recently helped a graphic artist in her mid-30s to buy her first home. The woman had fallen in love with a well-kept condo-apartment in a development with a low crime rate. The statistics gathered by Davis for his client indicated that the two-bedroom condo was fairly priced. They also showed a high level of inventory in the area, demonstrating the woman's strong bargaining position.

Still, Davis advised the graphic artist to bid full price for the place, at the same time seeking substantial seller assistance with her closing costs. The sellers readily accepted her request for more than $3,000 in help. Often sellers are much more willing to yield to such valuable "concessions" than to give way on price, Davis says. This helps protect their pride. Ellen James Martin is a former real estate editor and assistant business editor for The Baltimore Sun and author of "100 Best Real Estate Coverage Ideas."